Ginni Rometty Has A Plan To Turn IBM Around And She's Spending Billions Of Dollars On It
Billionaire Mark Cuban, who slammed IBM last week, clearly isn't paying close-enough attention.
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But IBM CEO Ginni Rometty does have a vision - to dominate the next high-profit areas of computing - and she's already launched a huge number of creative ideas to get IBM there.
Fresh New Partners
For instance, this week alone she signed two big cloud computing deals. On Friday, IBM announced an agreement with huge Chinese internet provider Tencent to build a new cloud for Chinese businesses. Tencent provides Internet to 1 billion users. The companies are going to build a bunch of new apps hosted on that new cloud.
IBM already has multiple cloud data centers in China. Rometty could have tried to go it alone to write apps and attract Chinese businesses. But by partnering with a big, local name, she greatly increased the company's chances to be a player in the world's fastest growing economy.
IBM also signed a huge partnership deal with Twitter on Wednesday. Rometty worked directly with Twitter CEO Dick Costolo to make it happen, she said.
IBM and Twitter will write new business apps, hosted on IBM's cloud, that make better use of Twitter data. These apps are not just about watching for mentions in a tweet or measuring sentiment. They will use tweets to analyze information in real time, so companies can make faster, better business decisions.
Imagine an app for a pharma company that uses Twitter to track the flu, so it knows when to up production of antiviral medication, for instance. IBM will also train 10,000 consultants to write custom twitter-analysis apps for companies.
The Twitter deal follows IBM's landmark deal with Apple to sell more iPads and iOS phones to enterprises by writing more custom mobile apps for them. The fruits of that will begin next month, with the first dozen apps available this quarter, being tested by the first 50 customers.
11 Months Of Creative Maneuvers
Those deals follow a whole bunch of other interesting, creative announcements under Rometty's reign. Since January IBM has:
... committed $1 billion to turn its mind-blowing natural language analytics engine Watson into a cloud service. Watson powers everything from new cancer treatments to a personalized shopper app (you can ask Watson if you should buy that shirt).
... launched a new cloud service called Bluemix, which lets developers write and host apps in the cloud. This competes with services from Microsoft, Google,, and includes access to Watson.
... expanded its partnership with SAP where SAP will offer its software via IBM's cloud internationally, a major win over competitor Amazon.
... launched a new family of hardware with the new Power 8 chip. These systems are geared toward the cloud and can quickly crunch through massive amounts of data. IBM is also giving away the Power 8 designs as a free and open source project, so any company can take them, change them. (We'll see if any of this helps Power 8 become popular, but it is a creative approach.)
... spending $3 billion to invent new kinds of microchips, possibly ones that don't use silicon.
These announcements are in addition to the typical things you'd expect Rometty to do: spending more than $1 billion to build more data centers globally, launching software to help companies build clouds in their own data centers, supporting cloud apps for the Internet of Things.
At A Crossroads
There's no doubt that IBM is at a crossroads right now. IBM's revenues have shrunk 10 quarters in a row as companies shift from buying expensive hardware, software and consulting to renting it all, at lower costs, from service providers (AKA cloud computing).
Earlier this month Rometty had to admit that IBM's years-long promise to create $20 earnings per share profit by 2015 was not going to happen. The stock had been riding high on her repeated promise that IBM was on target to meet this goal. It's since crashed about 10% to about $164.
Steve Jennings/Getty Images
Rometty and the board had been twisting IBM into pretzels over that promise, borrowing billions of dollars to buy back shares, laying off thousands of workers and ditching underperforming business units to trim expenses. IBM even signed an unusual deal to shed its microchip business to GlobalFoundries, paying GlobalFoundaries $1.5 billion to take over the money-losing unit.
But with declining revenues, IBM had to admit it wouldn't meet that goal.
It hasn't, however, completely given up those tactics. The board this week said it will add another $5 billion to the share buyback program. That's in addition to the $1.4 billion it still has in the kitty to buy back shares.
IBM has already spent $13.5 billion to repurchase stock in the first nine months of the year (more than double its net income), Reuters reports. Since 2000, IBM has spent $108 billion buying back shares.
And that's why Cuban told CNBC last week that IBM has no vision. "What they've evolved into is a company that does [arbitrage] on acquisitions. It's stock buybacks. Who is IBM anymore?"
The jury is still out as to if and when Rometty's efforts will turn the tide. But she's definitely working all the angles.
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